Well, OK, I've been holding back because I'm not a fan of lists -- I'd rather know why people like things, and what the books are about, than how anyone ranks them -- but as a show of solidarity I'll play along.
My list is all made up of older books because for me a favorite is something that stands the test of time and numerous rereadings. Other, newer books may be future favorites, when I get around to rereading them a couple of times; older books may rise to the top as subsequent readings remind me of why I like them. On the other hand, I think it's possible to wear out a book by too many rereadings, which is why LOTR is not at the top of my list, although once it would have been. (All of which is to say don't hold me to any of this. Another day I might post a somewhat different list.)
1. The Riddlemaster of Hed, by Patricia A. McKillip
2. A Wizard of Earthsea, by Ursula K. LeGuin
3. Lud-in-the-Mist, by Hope Mirrlees
4. Gate of Ivrel, by C. J. Cherryh
5. Lord of the Rings (you all know the author)
6. The Last Unicorn, by Peter S. Beagle
7. The Broken Sword, by Poul Anderson
8. Red as Blood, by Tanith Lee
9. A Christmas Carol, by Charles Dickens
10. The Once and Future King, by T. H. White
There are probably a dozen books I could just as easily have put in the last two or three places. And several of these books could have easily placed higher. (Indecisive? Not me! Well ... maybe.)